RCF eyes Rs 7500cr turnover next year

The fertilizer subsidy for FY13 has been pegged at Rs 61,000 crore in the Union Budget 2012-13. While few argue that the figure is less than expectation, RG Rajan, chairman and managing director of RCF says that since there has been a substantial fall in the international price of DAP, MOP and NPK, this number is quite apt.

"In fact, the subsidy on these items could be much lower next year than this year," he says. A 150% tax subsidy has also been announced in the Budget for expansion in the fertiliser sector alongside exemption of customs duty on equipment for fertiliser plants. This move is very attractive and would be beneficial to new investments for revamp and new projects, he says. Meanwhile, RCF is targeting Rs 7,500 crore turnover next year. "This year, in the first half of financial year, there was no sale of MOP," he says. "Next year, hopefully, there will be more sales of imported product." Rajan expects the figures should be around Rs 7,500 crore of turnover next year, that is around 20% growth. Below is the edited transcript of the interview. Also watch the accompanying video. Q: The subsidy number pegged at Rs 61,000 crore when we know that the actual number for last year itself is at Rs 68,000 crore which some believe is still an underestimation. Do you expect it to be revised higher or do you expect that companies may perhaps suffer a little on account of lower subsidy hand outs from the government? A: The number is quite correct for next year because there has been a substantial reduction in the international price of DAP, MOP and NPK. Hopefully, next year the subsidy on these will be much lower than the current year. So, the numbers provided should be adequate more or less. Q: That alleviates some concern because some of the analysts who pointed out that this years under recovery was about Rs 90,000 crore and the figure provided in FY12 was just about Rs 68,000 crore. Do you anticipate any shortfall for the current year or has that completely been factored? A: There has been some short fall this year, which may be paid next year. Q: How much would that amount be for the industry you are guessing? A: It may be in the range of Rs 15,000-20,000 crore, I cannot tell the exact number. For the next year amount it is okay, but the under provisioning has to be then taken into account. Q: A 150% tax subsidy has been given for expansions. Is that attractive enough for you to get in you or others in the industry to get into expansions? A: Definitely, it is a very attractive step and it will give benefits to new investments in revamp and new projects. Q: Would you soon become a MAT company? A: Yes because there has also been a deduction in the customs duty, from 5% it has been fully exempted. We are planning a project in Thal third trade of 1.3 million tonne per annum. The customs duty benefit is quite considerable. Though the excise duty has gone up and the service tax has gone up to some extent, but overall or on Rs 50 crore benefit is there in the investment. _PAGEBREAK_ Around 1.25% deduction is there in the capital investment coupled with other benefits. Also there have been reduction in the withholding tax on interest payments on external commercial borrowings. All this will make investments very attractive in this sector. We are planning to go ahead at Thal with investment of around Rs 4,000 crore. Q: You pointed out the fact that international prices have corrected, do you expect this downtrend to sustain or could they bounce back again given commodity prices? A: I don